1. Gund Institute for Ecological Economics Growth, Equity and Cumulative Causation brendan fisher Gund Institute for Ecological Economics University of Vermont

2. Gund Institute for Ecological Economics Kuznets Curve “Does inequality in the distribution of income increase or decrease in the course of a country’s economic growth?” (Kuznets, 1955) Economic Development Inequality

3. Gund Institute for Ecological Economics Solow’s Growth Model Y = Af(K) Time Y/N Poor Nations Rich Nations LR

4. Gund Institute for Ecological Economics Textbook Theory “The conventional textbook approach is that inequality is good for incentives and therefore good for growth, even though incentive and growth considerations might be traded off against equity or insurance goals” (Aghion et al. 1999).

5. Gund Institute for Ecological Economics Recent Findings…

6. Gund Institute for Ecological Economics Growth - Equity Studies Perotti (1992) Credit Markets Alesina and Rodrik (1994) Tax rate/redist. Denninger and Squire (1996) Perotti (1996) Marginal tax Partridge (1997) US States Barro (1999) Rich/Poor effect Glaeser et al (2003) f (legal capacity)

7. Gund Institute for Ecological Economics Our work

8. Gund Institute for Ecological Economics Gini Coefficient A B Income recipients Income 100% 0 Gini = A/(A+B)

9. Gund Institute for Ecological Economics Early Growth and Equity Gini 40

10. Gund Institute for Ecological Economics Recent Growth and Equity

11. Gund Institute for Ecological Economics A Closer Look

12. Gund Institute for Ecological Economics Long Run Dynamic

13. Gund Institute for Ecological Economics Long Run Dynamic

14. Gund Institute for Ecological Economics Long Run Dynamic

15. Gund Institute for Ecological Economics Another View

16. Gund Institute for Ecological Economics Growth and Gini Change

17. Gund Institute for Ecological Economics China, Denmark, Italy, Japan, Finland, France, Germany, Norway, Netherlands, Sri Lanka Canada, USA, India, Spain New Zealand, Sweden Australia, Portugal, United Kingdom 3% >-.2/yr> Growth and Gini Change

18. Gund Institute for Ecological Economics

20. Consistent? Low tax rate and high government spending show weak correlation to growth in cross- country analysis (Slemrod, 1995)

21. Gund Institute for Ecological Economics Conclusion I T-tests supports other studies: positive relationship between equity and growth. Confidently reject the mindset that ‘equity is sought at the cost of growth.’ GrowthEquity Intervention

22. Gund Institute for Ecological Economics Growth Equity Conclusion I

23. Gund Institute for Ecological Economics Conclusions II Increasing equity can be achieved even in economic downturn. (Global Slowdown since 1973, national downturns) –Middle East and North Africa low growth, lowered poverty levels over past 20yrs (Adams and Page, 2003). Growth Equity

24. Gund Institute for Ecological Economics Conclusions III Growth can be a force to increase inequity (UK, Australia, USA) “the growth process is unlikely to leave inequality unchanged” (Aghion, 1999) GrowthInequity Market

25. Gund Institute for Ecological Economics Cumulative Causation “If things were left to market forces unhampered by any policy interferences, industrial production, commerce, banking, insurance, shipping and indeed almost all of those economic activities which in a developing economy tend to give a bigger than average return – and, in addition, science, art, literature, education, and higher culture generally – would cluster in certain localities and regions, leaving the rest of the country more or less in a backwater” (Mrydal, 1957).

26. Gund Institute for Ecological Economics Source: Economic Apartheid in America, Collins, Yeskel, p. 42, 44.

27. Gund Institute for Ecological Economics Conclusions IV Policy and Implementation matter, often more than economic status. –Egypt, Sri Lanka, China seeking growth and equity. –USA, UK, Australia poor performance in combating inequity.

28. Gund Institute for Ecological Economics Policy Considerations and Implications Cross-country data can be helpful, but historical analysis, key component to not fall into IMF blanket policy trap. Enlightened by the process Cumulative Causation. Growth and equity as a dynamic relationship. Ecological consequences of growth and inequity.